Operational Problems at Dairy Agricultural Cooperatives and the Effects of Mergers: Focusing on Case Studies from Niigata Prefecture

Abstract

This work has clarified some recent problems at dairy agricultural cooperatives as well as the effects of mergers upon operations. First, mergers between dairy agricultural cooperatives primarily occur when the cooperatives are unable to leverage their various business functions due to a reduction in the scale of operations caused by a lower number of milk-producing households and a drop-off in business. Also, reducing the number of employees, closing branch offices, and scaling back certain projects subsequent to mergers produces a temporary improvement in operational balance of payments. However, the subsequent reduction in the number of milk-producing households and in business activity cancels out the effects of mergers. This creates the need for further mergers. Also, financial operations at dairy agricultural cooperatives have the following special characteristics. First, with regard to operational balance of payments, the cooperative’s primary business activities run a deficit, and the current profitability of the cooperative depends largely upon non-business earnings such as land rental fees, mutual insurance fees,miscellaneous interest, investment dividends received,and so on. With regard to balance of payments, dairy agricultural cooperatives resemble multi-purpose agricultural cooperatives, which make up for the deficits incurred by the agricultural business with earnings from credit and mutual insurance businesses.